You might also be interested in
Replies (8)
Please login or register to join the discussion.
A similar theme
Nowhere near as complex, but some years ago I heard that my local tax office was interested in our local "alternative" economy. Stroud in Gloucestershire has quite a few unconventional people living here, and for many years a currency has operated on a semi formal basis (including "bank statements"), known as "Stroud pounds". It is a fully functioning barter currency which allows for eachange of skills between members. It was the subject of a half hour programme on Radio 4 a while ago.
Of course, those who supplied services for barter in exchange for non business supplies would gain a tax advantage, and I did hear that the local tax office was showing an interest! I'm not sure how far this went, and thankfully have never acted for clients in the barter system, but the virtual money problem is a sophisticated devlopment of the same issue. Measuring and taxing "money" earned in different forms.
Nichola
in future where ther is no transcript you should record the podcast using a digital ditaphone and then plug it into dragon
SIMON
i see the lawyers are already in secondlife - skip a lifetimes knowledge and double the fees?
virtually
The question is which tax authority will be the first to open for business in Secondlife, and what its authority will be. I look forward eagerly to the Income Tax (virtualworlds) Bill 2008....
Virtual Assets for Tax?
having not played the 'game', I may not not be au-fait with the true goings on here, but it seems to me that what you could have is an 'asset' which may become tradeable in the real world.
If there was (maybe there is already??) a market (in the real world), and you sell the 'asset' for hard cash, then would it be a chargeable gain? I think maybe, Yes...and one with no base cost.
If you went on to do this on a regular basis, then I presume it could be attacked as trading and the profits taxed as income?
(I am assuming, of course, that all the 'money' mentioned in the article is locked in to the virtual world and, this being the case, you could only then have a virtual tax to match, as no one would pay out tax , in the form of hard cash, on what is a fictional income source, now would they)?
Nothing new under sun
I'm not totally up to speed on this virtual world business, but if it is spawning "real" millionaires there seem to be legally enforceable obligations in it ("choses in action" as they used to be called). I am not surprised the taxman is joining in and the demands won't be virtual! But maybe I just haven't got it.
Not so complicated
I've already done interviews on this question.
The answer is simple: virtual worlds are just trading mechanisms, no more and no less. They just happen to involve currencies created by people other than governments and the trading takes place under what may often be artificial names in what looks like an artificial place. What's new? This is the tax haven world of front companies that are deemed to have no residence, after all.
Those names are, however, in the case of virtual worlds identifiable by the provider of that space and the location of that space can also be identified. It is where the server is. Exchange rates can be established, and are. In that case accounts can be attributed to owners and information requests can be made of the owner of that artificial space for that data to be supplied. Put bluntly, the owners are acting as banks by any other name.
Banks are regulated, world wide. So should these owners be so: if not they become the facilitators of money laundering mechanisms at the very least. Once that is established the duty to supply information becomes key. If they choose to operate in locations where information is not exchanged then this comes a simple assault by these facilities (and the governments that allow this to happen) on the financial establishment of the major nations of the world. Action to counter that would have to be taken. This is not impossible.
As for the taxation of the transactions: these transactions take place at the point where control of the transaction is located i.e. where the mouse is clicked. This is a well known concept: it is found in much corporate tax law world wide. In that context if the mouse that controls the transaction is in the UK then that's where the tax is due, that's where the capital gain arises and that's where the estate is located.
How do you prove that? Only by proving the location of the account. So we're back to proper know your client rules required of any financial establishment.
I see no other way forward.
And for Rebecca's comment on what are called LETS schemes (Local Exchange Trading Systems) (see http://www.letslinkuk.net/) agreements on such schemes have been negotiated with the Revenue.
Which tax authority will be the first?
My money is on the one which has the website:
Note that is does not contain a suffix that one might expect like .usa, clearly there is one tax service which already feels that they own the virtual world!
Virtual Monopoly
If a group of people met regularly to play an extended game of Monopoly it would have no tax consequences.
If at the end of the game there were "prizes" based on the assets of the participants, would this not be gambling income and therefore free of tax?
If the rules permitted using real £ to buy additional Monopoly money which could be cashed in at any time would this change the gambling factor?
Is it not as simple as that?
For IHT though the pot will be an asset and fall into the deceased's estate.
Shame really , I understand that the Avatars can buy "enhanced" body parts, I was looking forward to some surreal arguments as to how we account for the expense!